Court of Appeal: Workers entitled to paid annual leave even when off sick

The Court of Appeal has ruled that an employee was entitled to be paid annual leave under the Working Time Directive, even though she had been absent from work through sickness.

In a landmark ruling, the court also ruled that the employee, Janet Larner, who was employed by NHS Leeds as a part-time clerical worker, was entitled to carry over annual leave she accrued while off sick to the following year, although she had not asked to do so.

Larner was on sick leave from her role as a clerical worker from January 2009 and was dismissed from her role in April 2010. Her compensation package did not contain any remuneration for the annual leave she had not taken during 2009 while she was on sick leave. NHS Leeds said that this was because Larner had neither requested the leave, nor had she asked for it to be carried over to 2010.

However, lawyers for the Unite union, of which Larner was a member, argued that Larner had been too ill while on sick leave to make arrangements regarding her annual leave entitlement, and argued that it should have been included in her compensation package.

The Court of Appeal upheld an earlier Employment Appeal Tribunal ruling that Larner was entitled to payment in lieu of outstanding holiday entitlement, regardless of whether she had requested to take the annual leave.

Employment lawyers have warned that the ruling could significantly affect employers. Chris Wellham of Hogan Lovells said: “Allowing long-term sick employees to carry leave forward automatically and to be paid for all the leave that has accrued on termination of employment could be very costly for employers.

“This opens the way for employees on long-term sickness absence to claim holiday pay for the whole period of their absence when their employment terminates. For an employee who has been absent for two leave years, for example, this could represent nearly three months’ pay.”

Richard Kenyon, head of employment and pensions at law firm Field Fisher Waterhouse, said the ruling could pose practical problems for employers and added that he expected further developments in this area: “While the case provides some clarity, it is unlikely to be welcomed by employers, given the practical advantages of requiring workers to make such requests. Nor is it likely to be an advantage overall to long-term sick employees. Although the decision provides a useful review of the key cases, it remains to be seen whether this will be the last word in this area.”